Amazon’s Small Hub Plan Threatens UPS, U.S. Postal Service

As the holiday season looms, Amazon plans to launch 1,000 small delivery hubs throughout the U.S., according to sources. With COVID-19, online orders soared, and Amazon was not capable of meeting its two-day delivery pledge. The company hired 175,000 new workers, which has helped clear the delivery pipeline, but wants to ensure that Amazon Prime subscribers can get as many products as possible on the same day. Its rivals Walmart and Target are able to speed deliveries due to their thousands of well-located stores.

Bloomberg reports that both Walmart and Target are “offering same-day delivery of online orders … [and] Walmart also recently started its own Prime-style subscription service.” An example of Amazon’s plan is one new hub located in Holyoke, Massachusetts, “just a short drive from more than 600,000 people.” But, it notes, “the mass opening of small, quick-delivery warehouses poses a significant threat to United Parcel Service and the U.S. Postal Service,” as Amazon “is pulling back from these long-time delivery partners.”

“In just a few years, Amazon has built its own UPS,” says MWPVL International president Marc Wulfraat, “who estimates Amazon will deliver 67 percent of its own packages this year and increase that to 85 percent.” “Amazon keeps spreading itself around the country, and as it does, its reliance on UPS will go away.”

Amazon countered that its expansion plans are simply “meant to supplement, not replace, its long-time partners” as a “dedicated last-mile delivery network.” Although some experts hinted that Amazon “would convert vacant department stores into distribution centers,” sources said that this “option is only a last resort … [because] they require extensive remodeling to accommodate an Amazon delivery hub.”

Urban Decision Group principal Rick Stein, who estimated that the U.S. has 50 percent more retail space than it needs, pointed out that, “any time you see retail being occupied by non-traditional retail uses, they’re just holding off what’s inevitable … at some point that mall is coming down.” CBRE Group reported that, “in the past three years, 13.8 million square feet of retail space has been converted to 15.5 million square feet of industrial space, including vacant shopping malls razed to make room for new warehouses.”

Amazon’s typical delivery stations are “about 200,000 square feet” and the company usually puts them “inside existing warehouses or signs long-term leases with development firms like ProLogis to build them to its exacting specifications.” A typical hub, adds Bloomberg, “can generate more than 1,000 vehicle trips each day, often in areas where roads are already congested.”

Although consumers want faster delivery, warehouses that are closer “generate a lot of traffic, creating inevitable clashes with local residents.”

“Regulation is definitely flat-footed right now,” said University of Oregon architecture professor Nico Larco. “The warehouse doesn’t want to be tucked away in an industrial district anymore. It wants to be right next to you. But when these things come to our neighborhoods, they’re unsightly.”